MercoPress. South Atlantic News Agency

Argentina's “miracle” on hold, says WSJ

With the mid-term elections in October, any progress will remain on standby for at least half a year, the WSJ foresaw

According to The Wall Street Journal, Argentina's economic recovery under President Javier Milei is on hold after the Libertarian Government's 2fragile” achievements have investors cautious, awaiting clearer long-term strategies.

The article highlights Milei's success in reducing monthly inflation from 20% to 2% and achieving a fiscal adjustment without widespread protests - which is about to change if recent developments are anything to go by - leading to a recovery in Argentine Eurobonds.

The WSJ also pointed out that a new IMF program is expected to provide US$ 12 billion to refinance part of Argentina's US$ 40 billion debt from Mauricio Macri's (2015-19) administration, which may not suffice for major challenges like lifting exchange controls. Despite President Milei's emergency decree (DNU) allowing further borrowing from the IMF, markets have shown little reaction, as the agreement was already taken for granted, the WSJ also noted.

Analyst Mauro Roca also underlined that the Argentine peso remained overvalued against the US dollar, making local prices too high as per international standards. Prematurely easing capital controls plus updating the exchange rate could risk reversing inflation gains.

Despite initial successes, the WSJ also cautions that breaking Argentina's cycle of economic crises will take years. Bonds have stabilized at low levels, and structural reforms are needed for sustainable growth and fiscal stability.

Regarding the country's political context, Milei retains over 50% popularity despite controversies like the $LIBRA token scandal. Upcoming mid-term elections will be crucial for his government’s ability to sustain reforms.

While Milei has achieved significant inflation control, Argentina’s economic “miracle” remains uncertain, hinging on deeper reforms and careful policy implementation in the coming months. Whether Milei will be up to these challenges remains to be seen. Hence, there is a lack of grounds for optimistic projections.

The WSJ analysis was apparently drafted before last Wednesday's mass protests, followed by the main labor groupings announcing a general nationwide strike, coupled with the reappearance of former Economy Minister and presidential candidate Sergio Massa, who called on all Peronists to unite against Milei's policies.

“Argentina's economic future will depend not only on the new agreement with the IMF, but also on the government's ability to implement structural reforms that consolidate fiscal stability and sustainable growth,” the article mentioned. With the mid-term elections in October, any progress will remain on standby for at least half a year, the WSJ foresaw.